Chapter Three Textiles and Apparel Article 3.1

45 Pages·2006·0.17 MB·English

by  Luis Mesias

Chapter Three

Textiles and Apparel1

Article 3.1: Textile Safeguard Measures

1. Subject to the following paragraphs, and during the transition period only, if, as a result of
the reduction or elimination of a duty provided for in this Agreement, a textile or apparel good
benefiting from preferential tariff treatment is being imported into the territory of another Party in
such increased quantities, in absolute terms or relative to the domestic market for that good, and
under such conditions as to cause serious damage, or actual threat thereof, to a domestic industry
producing a like or directly competitive good, the importing Party may, to the extent necessary to
prevent or remedy such damage and to facilitate adjustment, apply a textile safeguard measure to
that good, consisting of an increase in the rate of duty on the good to a level not to exceed the
lesser of:

(a) the most-favored-nation (MFN) applied rate of duty in effect at the time the
measure is applied; and

(b) the MFN applied rate of duty in effect on the date of entry into force of this
Agreement.

2. In determining serious damage, or actual threat thereof, the importing Party:

(a) shall examine the effect of increased imports of the good of the exporting Party or
Parties on the particular industry, as reflected in changes in such relevant economic
variables as output, productivity, utilization of capacity, inventories, market share,
exports, wages, employment, domestic prices, profits and losses, and investment,
none of which, either alone or combined with other factors, shall necessarily be
decisive; and

(b) shall not consider changes in consumer preference or changes in technology in the
importing Party as factors supporting a determination of serious damage or actual
threat thereof.

3. The importing Party may apply a textile safeguard measure only following an investigation
by its competent authority.

4. The investigations referred to in this Article shall be carried out according to procedures
established by each Party, which shall be notified to the Parties upon entry into force of this
Agreement or before a Party initiates an investigation.

1 For greater certainty, the obligations in Chapter Two (National Treatment and Market Access for Goods) with
respect to trade in goods between the Parties apply to trade in textile and apparel goods between the Parties.
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5. The importing Party shall deliver to the exporting Party or Parties, without delay, written
notice of the initiation of the investigation, as well as of its intent to apply or extend a textile
safeguard measure and, on request of the exporting Party or Parties, shall enter into consultations
with that Party or Parties.

6. The following conditions and limitations apply to any textile safeguard measure:

(a) no Party may maintain a textile safeguard measure for a period exceeding two
years, except that the period may be extended for up to one year;

(b) no Party may apply a textile safeguard measure to the same good of another Party
more than once;

(c) on termination of the textile safeguard measure, the Party applying the measure
shall apply the rate of duty set out in its Schedule to Annex 2.3 (Tariff Elimination)
as if the measure had never been applied; and

(d) no Party may maintain a textile safeguard measure beyond the transition period.

7. The Party applying a textile safeguard measure shall provide to the Party or Parties against
whose good the measure is taken mutually agreed trade liberalizing compensation in the form of
concessions having substantially equivalent trade effects or equivalent to the value of the
additional duties expected to result from the textile safeguard measure. Such concessions shall be
limited to textile or apparel goods, unless the consulting Parties otherwise agree.

8. If the consulting Parties are unable to agree on compensation within 30 days of application
of a textile safeguard measure, the Party or Parties against whose good the measure is taken may
take tariff action having trade effects substantially equivalent to those of the textile safeguard
measure. Such tariff action may be taken against any good of the Party applying the textile
safeguard measure. The Party taking the tariff action shall apply it only for the minimum period
necessary to achieve the substantially equivalent trade effects. The importing Party’s obligation to
provide trade compensation and the exporting Party’s or Parties’ right to take tariff action shall
terminate when the textile safeguard measure terminates.

9. (a) Each Party maintains its rights and obligations under Article XIX of the GATT
1994 and the Safeguards Agreement.

(b) No Party may apply, with respect to the same good at the same time, a textile
safeguard measure and:

(i) a safeguard measure under Chapter Eight (Trade Remedies); or

(ii) a measure under Article XIX of the GATT 1994 and the Safeguards
Agreement.

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Article 3.2: Customs Cooperation and Verification of Origin

1. The competent authorities of the Parties shall cooperate for purposes of:

(a) enforcing or assisting in the enforcement, and deterring circumvention, of the laws,
regulations, and procedures of each Party, and international agreements affecting
trade in textile or apparel goods, and;

(b) ensuring the accuracy of claims of origin for textile or apparel goods.

The Parties recognize that, in accordance with paragraph 10, providing technical or other
assistance to advance these purposes is an essential part of this Article.

2. A Party’s request for cooperation under this Article shall identify the relevant laws,
regulations, or procedures pertaining to that request.

3. (a) On the written request of the importing Party, an exporting Party shall conduct a
verification for purposes of enabling the importing Party to determine:

(i) that a claim of origin for a textile or apparel good is accurate; or

(ii) that the exporter or producer is complying with applicable customs laws,
regulations, and procedures regarding trade in textile or apparel goods,
including:

(A) laws, regulations, and procedures that the exporting Party adopts and
maintains pursuant to this Agreement; and

(B) laws, regulations, and procedures of the importing Party and the
exporting Party implementing other international agreements
regarding trade in textile or apparel goods.

(b) A request under subparagraph (a) shall include specific information regarding the
reason the importing Party is requesting the verification and the determination the
importing Party is seeking to make.

(c) The exporting Party shall conduct a verification under subparagraph (a)(i),
regardless of whether an importer claims preferential tariff treatment for the textile
or apparel good for which a claim of origin has been made.

(d) The exporting Party may conduct a verification of enterprises within its territory on
its own initiative.

4. The importing Party, through its competent authority, may assist in a verification conducted
under paragraph 3(a), including by conducting, along with the competent authority of the exporting
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Party, visits in the territory of the exporting Party to the premises of an exporter, producer, or any
other enterprise involved in the movement of textile or apparel goods from the territory of the
exporting Party to the territory of the importing Party. At the request of the exporting Party, the
importing Party may undertake such verification.

5. (a) The competent authority of the importing Party shall provide a written request to
the competent authority of the exporting Party 20 days before the proposed date of a
visit under paragraph 4. The request shall identify the competent authority making
the request, the names and titles of the authorized personnel that will conduct the
visit; the reason for the visit, including a description of the type of goods that are
the subject of the verification; and the proposed dates of the visit.

(b) The competent authority of the exporting Party shall respond within ten days of
receipt of the request, and shall indicate the date on which authorized personnel of
the importing Party may perform the visit. The exporting party shall seek, in
accordance with its laws, regulations, and procedures, permission from the
enterprise to conduct the visit. If consent is not provided, the importing Party may
deny preferential tariff treatment to the type of goods of the enterprise that would
have been the subject of the verification, except that the importing Party may not
deny preferential tariff treatment to such goods based solely on a postponement of
the visit, if there is adequate reason for such postponement.

(c) Authorized personnel of the importing and exporting Parties shall conduct the visit
in accordance with the laws, regulations, and procedures of the exporting Party.

(d) On completion of the visit, the importing Party shall provide the exporting Party
with an oral summary of the results of the visit and provide it with a written report
of the results of the visit within approximately 45 days of the visit. The written
report shall include:

(i) the name of the enterprise visited;

(ii) particulars of the shipments that were checked;

(iii) observations made at the enterprise relating to circumvention, if any; and

(iv) an assessment of whether the enterprise’s production records and other
documents support its claims of origin, for:

(A) a textile or apparel good subject to a verification conducted under
subparagraph 3(a)(i); or

(B) in the case of a verification conducted under subparagraph 3(a)(ii),
any textile or apparel good exported or produced by the enterprise.

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6. In accordance with its laws, each Party shall provide to the other Party production, trade,
and transit documents and other information necessary to conduct verifications under paragraph
3(a). Each Party shall treat any documents or information exchanged in the course of such
verification in accordance with Article 5.6 (Confidentiality). Nothwithstanding the foregoing, a
Party may publish the name2 of an enterprise if the Party has determined, consistent with its
laws, that such enterprise:

(a) has engaged in circumvention of the laws, regulations, or procedures of that Party
or of international agreements affecting trade in textile or apparel goods; or

(b) has failed to demonstrate that it produces, or is capable of producing, textile or
apparel goods.

7. (a) (i) If, during a verification conducted under subparagraph 3(a), the information
to support a claim for preferential tariff treatment is insufficient, the
importing Party may take the actions it considers appropriate, which may
include suspending the application of such treatment to:

(A) in the case of a verification conducted under subparagraph 3(a)(i),
the textile or apparel good for which a claim for preferential tariff
treatment has been made; and

(B) in the case of a verification conducted under subparagraph 3(a)(ii),
any textile or apparel good exported or produced by the enterprise
subject to that verification for which a claim of preferential tariff
treatment has been made.

(ii) If, on completion of a verification conducted under subparagraph 3(a), the
information to support a claim for preferential tariff treatment is insufficient,
the importing Party may take the actions it considers appropriate, which may
include denying the application of such treatment to any textile or apparel
good described in clauses (i)(A) and (B).

(iii) If, during or on completion of a verification conducted under subparagraph
3(a), the importing Party discovers that an enterprise has provided incorrect
information to support a claim for preferential tariff treatment, the importing
Party may take the actions it considers appropriate, which may include
denying the application of such treatment to any textile or apparel good
described in clauses (i)(A) and (B).

(b) (i) If, during a verification conducted under subparagraph 3(a), the information
to determine the country of origin is insufficient, the importing Party may
take the actions it considers appropriate, which may include detention of any

2 The Party shall provide advance notice to the other Parties of the procedures by which such publication is to be
made.
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textile or apparel good exported or produced by the enterprise subject to the
verification.

(ii) If, on completion of a verification conducted under subparagraph 3(a), the
information to determine the country of origin is insufficient, the importing
Party may take the actions it considers appropriate, which may include
denying entry to any textile or apparel good exported or produced by the
enterprise subject to the verification.

(iii) If, during or on completion of a verification conducted under subparagraph
3(a), the importing Party discovers that an enterprise has provided incorrect
information as to the country of origin, the importing Party may take
appropriate action, which may include denying entry to any textile or
apparel good exported or produced by the enterprise subject to the
verification.

(c) The importing Party may continue to take the actions it considers appropriate under
this paragraph only until it receives information sufficient to enable it to make the
determination in subparagraphs 3(a)(i) or (ii), as the case may be.

8. No later than 45 days after it completes a verification conducted under subparagraph 3(a),
the exporting Party shall provide the importing Party a written report on the results of the
verification. The report shall include all documents and facts supporting any conclusion that the
exporting Party reaches. After receiving the report, the importing Party shall notify the exporting
Party of any action it will take under subparagraph 7(a)(ii) or (iii) or 7(b)(ii) or (iii), based on the
information provided in the report.

9. On the written request of a Party, two or more Parties shall enter into consultations to
resolve any technical or interpretive difficulties that may arise or to discuss ways to improve
customs cooperation regarding the application of this Article. Unless the consulting Parties
otherwise agree, consultations shall begin within 30 days after delivery of the request and conclude
within 90 days after delivery.

10. A Party may request technical or other assistance from any other Party in implementing this
Article. The Party receiving such a request shall make every effort to respond promptly and
favorably to it.

Article 3.3: Rules of Origin, Origin Procedures, and Related Matters

1. Except as provided in this Article and the Annexes to this Chapter, Chapter Four (Rules of
Origin and Origin Procedures) applies with respect to textile and apparel goods.

Consultations on Rules of Origin

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2. On request of a Party, the Parties shall, within 30 days after the request is delivered, consult
on whether the rules of origin applicable to a particular textile or apparel good should be revised.

3. Where the consultations referred to in paragraph 2 concern an input not available in
commercial quantities, each Party shall consider all data that a Party presents demonstrating that
there is substantial production in its territory of such input. The Parties shall consider that there
is substantial production if a Party demonstrates that its domestic producers are capable of
supplying commercial quantities of the input to the Parties in a timely manner.

4. The Parties shall endeavor to conclude the consultations within 90 days after delivery of the
request. If the Parties reach an agreement to revise a rule of origin for a particular good, the
agreement shall supersede that rule of origin when modified by the Commission in accordance
with Article 20.1.3(b).

Fabrics, Yarns, and Fibers Not Available in Commercial Quantities

5. (a) At the request of an interested entity, the United States shall, within 30 business
days of receiving the request, add a fabric, fiber, or yarn in an unrestricted or
restricted quantity to the list in Annex 3-B, if the United States determines, based on
information supplied by interested entities, that the fabric, fiber, or yarn is not
available in commercial quantities in a timely manner in the territory of any Party,
or if no interested entity objects to the request.

(b) If there is insufficient information to make the determination in subparagraph (a),
the United States may extend the period within which it must make that
determination by no more than 14 business days, in order to meet with interested
entities to substantiate the information.

(c) If the United States does not make the determination in subparagraph (a) within 15
business days of the expiration of the period within which it must make that
determination, as specified in subparagraph (a) or (b), the United States shall grant
the request.

(d) The United States may, within six months after adding a restricted quantity of a
fabric, fiber, or yarn to the list in Annex 3-B pursuant to subparagraph (a), modify
or eliminate the restriction.

(e) If the United States determines before the date of entry into force of this Agreement
that any fabrics or yarns not listed in Annex 3-B are not available in commercial
quantities in the United States pursuant to section 112(b)(5)(B) of the African
Growth and Opportunity Act (19 U.S.C. § 3721(b)), section 204(b)(3)(B)(ii) of the
Andean Trade Preference Act (19 U.S.C. § 3203(b)(3)(B)(ii)), or section
213(b)(2)(A)(v)(II) of the Caribbean Basin Economic Recovery Act (19 U.S.C. §
2703(b)(2)(A)(v)(II)), the United States may, after consultation with the Parties, add
such fabrics or yarns in an unrestricted quantity to the list in Annex 3-B.
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6. At the request of an interested entity made no earlier than six months after the United States
has added a fabric, yarn, or fiber in an unrestricted quantity to Annex 3-B pursuant to paragraph 5,
the United States may, within 30 business days after it receives the request:

(a) delete the fabric, yarn, or fiber from the list in Annex 3-B; or

(b) introduce a restriction on the quantity of the fabric, yarn, or fiber added to Annex 3-
B;

if the United States determines, based on the information supplied by interested entities, that the
fabric, yarn, or fiber is available in commercial quantities in a timely manner in the territory of any
Party. Such deletion or restriction shall not take effect until six months after the United States
publishes its determination.

7. Promptly after the date of entry into force of this Agreement, the United States shall
publish the procedures it will follow in considering requests under paragraphs 5 and 6. After
publication of such procedures, a Party or Parties may request consultations with respect to those
procedures.

De Minimis

8. A textile or apparel good that is not an originating good because certain fibers or yarns used
in the production of the component of the good that determines the tariff classification of the good
do not undergo the applicable change in tariff classification set out in Annex 3-A, shall nonetheless
be considered to be an originating good if the total weight of all such fibers or yarns in that
component is not more than ten percent of the total weight of that component.3

9. Notwithstanding paragraph 8, a good containing elastomeric yarns4 in the component of the
good that determines the tariff classification of the good shall be originating only if such yarns are
wholly formed in the territory of a Party.5

Treatment of Sets

10. Notwithstanding the specific rules of origin in Annex 3-A textile or apparel goods
classifiable as goods put up in sets for retail sale as provided for in General Rule of Interpretation 3
of the Harmonized System, shall not be regarded as originating goods unless each of the goods in
the set is an originating good or the total value of the non-originating goods in the set does not
exceed ten percent of the adjusted value of the set.

3 For greater certainty, when the good is a fiber, yarn, or fabric, the “component of the good that determines the
tariff classification of the good” is all of the fibers in the yarn, fabric, or group of fibers.
4 For greater certainty, the term “elastomeric yarns” does not include latex.
5 For purposes of this paragraph, “wholly formed” means that all the production process and finishing operations,
starting with the extrusion of all filaments, strips, films, or sheets, or the spinning of all fibers into yarn, or both,
and ending with a finished yarn or plied yarn, took place in the territory of the Party.
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Treatment of Nylon Filament Yarn

11. A textile or apparel good that is not an originating good because certain yarns used in the
production of the component of the good that determines the tariff classification of the good do not
undergo an applicable change in tariff classification set out in Annex 3-A shall nonetheless be
considered to be an originating good if the yarns are those described in Section
204(b)(3)(B)(vi)(IV) of the Andean Trade Preference Act (19 U.S.C. § 3203(b)(3)(B)(vi)(IV)).

Duty-free Treatment for Certain Goods

12. An importing and an exporting Party may identify at any time particular textile or apparel
goods of the exporting Party that they mutually agree are:

(a) hand-loomed fabrics;

(b) hand-made goods made of such hand-loomed fabrics;

(c) traditional folklore handicraft goods; or

(d) handmade goods that substantially incorporate a historical or traditional regional
design or motif.

A historical or traditional regional design or motif includes, but is not limited to, depictions of
traditional geometric patterns or native objects, landscapes, animals, or people.

13. The importing Party shall grant duty-free treatment to goods identified pursuant to
paragraph 12, if the competent authority of the exporting Party certifies such identification.

Regional Cumulation

14. In the light of their desire to promote regional integration, the Parties shall enter into
discussions, within six months of the date of entry into force of this Agreement, or at a time to be
determined by the Parties, with a view to deciding, subject to their applicable domestic legal
requirements (such as a requirement to consult with the legislature and domestic industry), whether
materials that are goods of countries in the region may be counted for purposes of satisfying the
origin requirement under this Chapter as a step toward achieving regional integration.

Article 3.4: Committee on Textile and Apparel Trade Matters

The Parties hereby establish a Committee on Textile and Apparel Trade Matters. The
Committee on Textile and Apparel Trade Matters shall meet upon the request of any Party or the
Free Trade Commission to consider any matter arising under this Chapter.

Article 3.5: Definitions

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For purposes of this Chapter:

claim of origin means a claim that a textile or apparel good is an originating good or satisfies the
non-preferential rules of origin of a Party;

exporting Party means the Party from whose territory a textile or apparel good is exported;

importing Party means the Party into whose territory a textile or apparel good is imported;

input means a fiber, yarn, or fabric used in the production of a textile or apparel good;

interested entity means a Party, an actual or potential purchaser of a textile or apparel good, or an
actual or potential supplier of a textile or apparel good;

textile or apparel good means a good listed in the Annex to the WTO Agreement on Textiles and
Clothing, except for those goods listed in Annex 3-C;

textile safeguard measure means a measure applied under Article 3.1; and

transition period means the five-year period beginning on the date of entry into force of this
Agreement.
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